With the recent one-year anniversary of the Dodd-Frank Act on July 21, members of Congress as well as industry officials have been reflecting on the law’s effects—for good or ill.
The co-author of the landmark legislation, Rep. Barney Frank, D-Mass., ranking member on the House Financial Services Committee, remarked during a press conference in early July that he believes the Wall Street reform bill that he co-authored with former Connecticut Sen. Christopher Dodd is “holding up pretty well,” with “very few calls for substantial amendments” to be made to it.
Frank’s optimism is unmatched by Congressional Republicans. One of those is Sen. Richard Shelby, R-Ala., ranking member on the Senate Banking Committee. Shelby said during a July 12 hearing to examine how Dodd-Frank has enhanced investor protection that, “We can see more clearly the consequences of [Dodd-Frank's] special interest agenda.” Shelby maintained that Dodd-Frank “has not helped investors;” rather it “has saddled Main Street and providers of capital—the engines of economic growth—with a long list of new regulatory requirements.” At a time when the unemployment rate is at 9.2%, Shelby said, “this hardly seems like a wise course.”
Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, characterized Dodd-Frank as “a story of the ‘good, the bad and the ugly.’” Bachus said recently that while a “few” of Dodd-Frank’s provisions represent “useful reforms” to a financial system that came close to collapse in the fall of 2008, the “bad and the ugly” parts of Dodd-Frank “far outweigh those.” What’s more, he said, “their impact on our economy will be staggering.” The two primary factors that drive the nation’s economy, Bachus said, “capital and work force, will both be harmed by Dodd-Frank.”
Among the law’s 2,300 pages are 400 regulatory mandates that will be imposed on the private sector, Bachus continued. “Both financial and nonfinancial businesses will be forced to shift capital from hiring, investments in new equipment and other productive uses to comply with these new rules. Likewise, these businesses will have to redirect their workers’ time and energy to compliance rather than productive work.”
While the supporters of Dodd-Frank “sold it as tough ‘Wall Street reform,’” Bachus said, “the greatest regulatory burden will be borne by those far from Wall Street.”
Missed Deadlines and Frustration
An analysis of Dodd-Frank’s progress performed by the law firm Davis Polk Wardwell in Washington found that as of July 1, the regulatory agencies have finalized 38 rules, proposed 121 and missed 26 deadlines.
Frank argued during his comments that the real “strength” of the Dodd-Frank Act is that it “sets forth some very important principles, but gives the regulators the ability to apply them in practice.”